· The dollar gave up early gains to trade slightly lower on the day against a basket of currencies on Friday as a still unsigned partial U.S.-China trade deal kept investors on edge and the shortened holiday week limited currency moves.
The dollar index, which compares the greenback against six other major currencies, was down 0.12% at 98.253. Earlier in the session, the index rose as high as 98.544, its highest since Oct. 15. For the week, the index was about flat.
“I think it’s a lacklustre market mood today, that tone was set with the muted FX response to Trump signing the HK bill late on Wednesday,” said Amo Sahota, director at Klarity FX in San Francisco.
“Late session gains for sterling and euro have weighed on the U.S. dollar, and it looks like enough work has been done to prevent U.S. dollar index closing above 98.45, which would have setup a bullish range break,” Sahota said.
The euro was 0.09% higher against the greenback after data showed eurozone inflation accelerated faster than expected in November on a rise in food and services prices. Annual inflation rates however remained far lower than European Central Bank expectations.
The pound hovered around $1.29 on Friday, showing little reaction to political headlines, with analysts expecting little movement in the run-up to the UK general election on Dec. 12. The pound was last up 0.2% at $1.2937.
Against the Japanese yen, which tends to attract investors during times of geopolitical or financial stress as Japan is the world’s biggest creditor nation, the dollar slipped 0.09%.
“The dollar index is lower on the session but on the month it has been solid,” Sahota said.
For the month, the dollar index was up 0.9%, its best monthly performance since July.
· Beijing is insisting U.S. tariffs must be rolled back as part of any phase one trade deal with Washington, China’s Global Times newspaper said on Sunday citing unnamed sources, amid continued uncertainty on whether the two sides can strike a deal.
“A US pledge to scrap tariffs scheduled for December 15 cannot replace the rollbacks of tariffs,” the newspaper said in a tweet, referring to an additional round of tariffs on Chinese imports to be implemented in the absence of a trade deal.
· China’s central bank governor Yi Gang said in a signed article published on Sunday that Beijing should maintain “normal” monetary policy as long as possible since economic growth is still within a reasonable range and inflation is mild overall.
China will not resort to quantitative easing even as the monetary policies of the world’s major economies are approaching zero interest rates, People’s Bank of China Governor Yi Gang wrote in an article published by the leading Communist Party theoretical journal Qiushi.
· British Prime Minister Boris Johnson said on Friday that Britain would leave the European Union by Jan. 31 at the latest if his Conservative Party win a majority in the election in two weeks time.
“If we can get a working majority then we will come on Jan. 31 at the absolute latest,” Johnson told LBC radio.
He also repeated his message that he saw no reason why Britain would need to extend the transition period after Brexit beyond the end of 2020.
· Hong Kong police fired tear gas to disperse anti-government protesters on Sunday as thousands took to the streets of the Chinese-ruled city after a rare lull in violence.
The protest, which took place in the bustling shopping district of Tsim Tsa Tsui, came after hundreds of people had marched to the U.S. consulate to show “gratitude” for U.S. support for the demonstrations that have roiled the China-ruled financial hub for nearly six months
· The Hong Kong Human Rights and Democracy Act of 2019, signed into law by U.S. President Donald Trump, is touted by Congress as a way to deter Beijing’s influence and interference in Hong Kong’s internal affairs.
But if Hong Kong’s so-called special status is compromised as a result of the law, the city’s economy could be damaged — bringing down with it the U.S. and China.
· Oil prices dropped on Friday, cutting into a winning month for crude.
West Texas Intermediate futures fell more than 4% to settle at $55.17, posting a 4.1% loss for the week and snapping a 3-week winning streak. Trading volume was lighter than usual Friday, and crude did still manage to finish the month with a 2.3% gain. European Brent futures fell $1.44 to settle at $62.43. For the month prices were up 6%, making it the best month since April.
Traders chalked the decline up to the resignation announcement of Iraq’s prime minister after weeks of deadly protests, as well as investors jockeying for position before the OPEC+ meeting next week.
Following weeks of unrest in Iraq, Prime Minister Adel Abdul-Mahdi announced plans to resign Friday. Some traders believe an end to the country’s ongoing protests will lead to an end of threats to oil disruption, which is bearish for prices.
· OPEC and its crude oil exporting allies will consider deepening their existing oil supply reduction deal by about 400,000 barrels per day to reach 1.6 million bpd, Iraq’s oil minister said on Sunday.
Reference: Reuters, CNBC
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